Dun & Bradstreet Composite CFO Optimism Index decreased by 15.7% (q-o-q) in Q2 2021

Mumbai, June 14, 2021: A recent survey of Chief Financial Officers (CFOs) in India, conducted by data and analytics firm Dun & Bradstreet, found that the confidence in financial and macro-economic conditions has decreased. The pan-India survey compared confidence levels from Q2 2021 (Apr-Jun of the calendar year 2021) with the previous quarter. Based on the responses, the Dun & Bradstreet Composite CFO Optimism Index showed a decrease of 15.7%, on a quarter-over-quarter (q-o-q) basis to 102.2 during Q2 2021.

The Dun & Bradstreet Composite CFO Optimism Index analyses the optimism level of CFOs on 12 parameters: operating margin, liquidity position, level of financial risk on company’s balance sheet, risk appetite, need for raising short-term and long-term funds, cost of raising funds, availability of funds, domestic and global macroeconomic scenario, overall scenario for mergers and acquisitions, and level of financial risks for corporate sector as a whole.

The survey also revealed the following insights on the overall business climate in India:

• The optimism level for financial performance of companies and the macroeconomic scenario decreased by 13% (q-o-q) and 20% (q-o-q) respectively during Q2 2021
• On a sectoral level, optimism level decreased by 5.2% (q-o-q) in the industrial sector and by 28.7% (q-o-q) in the services sector during Q2 2021
• Six of the eight parameters under the financial performance sub-index deteriorated in Q2 2021 on a q-o-q basis
• 43% of CFOs expect domestic macro-economic scenario to be favourable during Q2 2021, down from 78% in Q1 2021
• 44% of CFOs expect global macro-economic scenario to be favourable during Q2 2021, down from 53% in Q1 2021
• Percentage of CFO’s who have indicated an increase in the operating margin of the company (41%) and liquidity position of their firm (36%) is the lowest in three quarters
• Only 11% of CFOs in the services sector expect the level of financial risk on company’s balance sheet to decrease in Q2 2021, which is the lowest ever
• 54% of CFOs expect the overall scenario for mergers & acquisitions to be favourable during Q2 2021, highest since Q3 2018
• 44% of CFOs expect their need for short term funds to increase in Q2 2021 compared to 35% in Q1 2020

Commenting on the findings of the survey, Arun Singh, Global Chief Economist, Dun & Bradstreet, said “The second wave of the pandemic has dented the optimism level of CFOs during Q2 2021. The uncertainty inflicted by the severe second wave was reflected in the steep fall in the optimism level for domestic economic conditions. Optimism for financial performance also waned amongst the CFOs especially with regards to profitability and liquidity position of companies. It was accompanied by a rise in the expectation of financial risk in the company’s balance sheet particularly amongst the CFOs in the services sector, and low appetite for raising long-term funds. Dun & Bradstreet COVID-19 business disruption tracker also shows that as of 3^rd week of May, 49% of business were disrupted owing to COVID-19 related restrictions with 55% of estimated sales revenues and 58% of employees of associated firms being impacted as a result.

The survey also captured the intention for restructuring of portfolios by the CFOs where companies with healthy balance sheets would seek opportunities in a context of discounted assets and lower valuations. 54% of CFOs expect the overall scenario for mergers & acquisitions to be favourable during Q2 2021, highest since Q3 2018”.